GBPUSD bounce off from a major support level, possible bullish run ahead

The strong recovery attempt from the U.S dollar index in the last month pushed the GBPUSD pair significantly lower in the global market. The cable bulls found some decent bearish pressure near the critical resistance level at 1.34606 before collapsing into the major support level. The pair found some decent bullish support at 1.30560 before it started to rally higher. Most of the aggressive price action traders went long on the GBPUSD pair after the formation of a bullish engulfing pattern in the daily chart.

GBPUSD daily chart analysis

Figure: GBPUSD bouncing off from a major support level

From the above figure, you can clearly see the bulls are trying to take control of the market but the medium term bearish trend is extremely powerful to execute long orders based on the daily bullish engulfing pattern. However, prior to the closing of the last trading week, the bulls managed to take out the bearish pin bar resistance at 1.3270 which is a clear sign of weak bears. In the upcoming week, the pair is most likely to head towards the nearest resistance level at 1.34219 and a daily closing of the price above that level will ultimately lead this pair towards the 200 days SMA. From that level, we might see some bullish spike with an attempt to retest the 100 days SMA. A daily closing of the price above the 100 SMA will confirm the establishment of the temporary bottom near the 1.30560 mark.

GBPUSD weekly chart analysis

Figure: Bullish pin bar formed at the 50% retracement level

In the weekly chart, we have nice bullish pin right near the 50% retracement level. Most of the investors are expecting a bullish run in the GBPUSD pair in the upcoming week which will eventually target the 38.2% Fibonacci retracement level. A clear break of the level will eventually lead this pair towards the 200 weekly SMA at 1.40264. This level is going to provide a significant bearish threat to the GBPUSD pair. However, if the bulls manage to clear the high of 15th April we will see an extended bullish rally in the GBPUSD pair.

On the downside, we need to break below the weekly 100 SMA which is backed by the 50 bullish retracement level. A weekly closing of the price below that level will eventually lead this pair towards the next major support level at 1.28514. This level is very crucial for the long-term investors since we have our 61.8% bullish retracement level. The cautious bull will be waiting for bullish price action signal to execute long orders but a clear break of this level will result in massive fall. If the bulls fail to regain their momentum at the current level, we might see another retest of the 100 SMA. Since it will be the 4th retest in this trading year, we can assume it as a very weak support level. So the traders are advised to execute long with a very tight stop to save their investment.